1. ISQA 407 Introduction to Global Supply & Logistics Management Winter 2012 Portland State University

2. Agenda Quick review of last class Production Inventory Systems MRP / ERP EOQ Presentation on Kropf Q&A

3. Production: Product focus: -Customer centric -Flexible -Integrated Functional focus: -Few operations -Efficiency oriented -Postponement -DFx

4. 4 Definitions in production Routing: The operations to be performed, their sequence, the work centers visited, & the time standards Bottleneck: A resource whose capacity is less than the demand placed on it Due date: When the job is supposed to be finished Slack: The time that a job can be delayed & still finish by its due date Queue: A waiting line

5. Definitions in production Stock keeping Unit: a product given a part number and productized Job Lot: All parts stored and pulled by product Cross-docking: Distribution centers / spoke & wheel.

6. 6 High Volume / Low Mix Operations High volume flow operations generally have fixed routings Bottlenecks are easily identified Commonly use line-balancing to design the process around the required tasks Examples?

7. 7 Low Volume / High Mix Operations Low volume job shop operations are designed for flexibility. Each product or service may have its own routing (scheduling is much more difficult) Bottlenecks move around depending upon the products being produced at any given time Examples?

8. Inventory Is it an asset or a liability? Why?

9. Inventory: Cycle inventory: Turns – How much is needed? Carry costs Obsolescence flexibility Safety Stock: Buffer against risk Costs? Seasonal Inventory Smoothing Examples?

10. Location & Transport Infrastructure, customers, costs Water: Low cost, lengthy Rail: Low cost, lengthy Trucks: quick, flexible, costly with fuel Air: High cost, quick General Rule: Higher cost of product, emphasize flexibility over costs. Also consider life cycles.

11. Information Daily – MRP that coordinates production, inventory, & transport Forecasting & Planning – ERP that includes forecast, capacity, customer orders, etc

12. Material Requirements Planning Materials requirements planning (MRP) is the logic for determining the number of parts, components, and materials needed to produce a product. MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced. Dependent demand drives MRP. MRP is a software system.

13. System wide ERP ERP software applications used to manage product planning, parts purchasing, inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business

14. Customers Suppliers P1 Plan Supply Chain Plan P2 Plan Source P3 Plan Make P4 Plan Deliver SourceMakeDeliver S1 Source Stocked Products M1 Make-to-Stock or order M2 DFx M3 production schedule D1 Deliver Products D2 Order Management D3 Mode of transport S2 Procurement S3 Credit / LOI / LOC Return do to sustainability P5 Plan Returns Return do to Warranty Enable Closed Loop Supply Chain Four + One Categories of SCM Operations (p. 45)

15. Plan – Demand Forecasting Methods Sales and Operating Plan process Qualitative – Personal feelings Casual – One effect has outcome on another Time series – Historical data Simulation – causal + time (elasticity) Four major variables: supply, demand, Product type, competition

16. 16 Objectives – Aggregate Planning Minimize Costs/Maximize Profits Maximize Customer Service Minimize Inventory Investment Minimize Changes in Production Rates Minimize Changes in Work-force Levels Maximize Utilization of Plant and Equipment

17. Methods of Aggregate Planning Production capacity = demand; highly efficient 85% utilization Various levels of capacity = demand; incremental approach Inventory & Backlog = Demand; used when long lead-times or need for linear output Postponement – part of DFx; cost structure and life cycles high and short.

18. Inventory - EOQ Cycle, safety, or seasonal? Strategy with Aggregate Plan? Order costs and inventory cost can be high Lot size efficiency (LTL vs: FT, set-up times, JIT, etc…

19. 19 Basic EOQ Model 1.Demand is known, constant, and independent 2.Lead time is known and constant 3.Receipt of inventory is instantaneous and complete 4.Quantity discounts are not possible 5.Only variable costs are setup and holding 6.Stockouts can be completely avoided Important assumptions

20. 20 An EOQ Example Determine optimal number of items to order D = 27 units per week S = $100 per order H = $1.00 per unit per week Q* = 2DS H Q* = 2(27)(100)1.00 = 5,400 = 73.48 units

21. Procurement Purchasing: two types MRO – Maintenance, repair, and operations Direct – strategic procurement of components Sourcing: Selection of a supplier including:TQRDCE Contracts: For long term relationships AR/AP: credit policies (LOI, LOC, MOU, PO)

22. Responsibilities of Sourcing Professionals Beyond just continuity of supply.. Labor rights Child labor Working conditions Benefits and hours Employee safety considerations Environmental considerations Pollution/emissions/utilization of scare or protected resources Recycling/Reclaim Utilization of hazardous materials (IE: ozone depleting substances, lead, etc.) Who is responsible? What is produced via mfg process? What is included in the finished product? Have we disclosed to end customer? What is the impact to the company? (CSRs, tracking. Expensive)